Understanding The Value People Add To Organisations
The fully loaded cost of employing someone is on average 3 times base salary.  The main ’on-costs’ are: direct employee benefits, organisational infrastructure, accommodation, IT systems, management and leadership costs etc.
Therefore the full cost of employing a knowledge worker paid, for example, £65,000 is in the region of £200,000.
Since the value delivered by an individual has to be at least their fully loaded cost, then a conservative estimate of the value of such an employee would be £200,000.
Incorporating this concept of value into HR planning helps the true financial picture to emerge, and helps in prioritisation and decision-making.
In particular, lost value is by far the greatest cost of labour turnover, and since organisations are continually renewing staff, this serves as a useful measure of recruitment costs.
Research evidence suggests that he total cost of replacing a knowledge worker is roughly equal to their annual fully loaded cost.  As such, accelerated early development will significantly reduce the cost of turnover, as well as having a positive effect on retention and individual performance.
When viewed this way, the costs of delays and benefits of speeding up early development can be quantified  – and in this example would be, at a conservative estimate, £4,000 per week.
Considering human performance in financial terms is essential in business today as it helps in deciding whom to employ how much it is worth spending to find high performers and what is the true cost of poor performers.  Investment in this area delivers one of the highest rates of return achievable for any organisation.